Journal of Accounting and Management ISSN: 2284 – 9459 JAM Vol. 12, No.

2 (2022)

Auditors’ Independence, Audit Tenureship, Firm

Characteristics and Audit Quality: Evidence from Nigeria

David Oziegbe1, Ruth Odien2

Abstract: This study aims at examining empirically the effect of auditors’ independence, audit tenureship,
firm characteristics on audit quality in Nigeria. The population of the study comprises a sample of ten (10)
listed pharmaceutical companies listed on the Nigerian Exchange Group (NGX). The time period for the
study covers audited financial statements of the companies from 2013-2019. The study focused on two
explanatory variables: auditors’ independence and audit tenure, and two control variables: firm size and firm
age. While the dependent variable audit quality was proxied by big four firms and non-big four firms. The
secondary source of data was adopted in this study. The data collected were analyzed using the panel
regression techniques. The results suggest that all of the explanatory and control variables have a positive and
significant effect on audit quality. The study recommends that auditors’ independence is directly proportional
to audit quality, thus audit firms should be independent in order to enhance audit quality. Auditor-client
engagement should not exceed 3years in order to avoid familiarity threat. In addition, firms are advised to
engage the services of one of the big audit firms since it results to improved audit quality. Younger firms
should understudy older firms to learn from the experiences that they have acquired over the years that impact
positively on audit quality.

Keywords: auditors independence, audit tenureship, audit quality

JEL Classification: M41; M42

1. Introduction
The objective of an audit assignment is to express an expert opinion on the true and fair view of the
financial statements prepared and presented by management with respect to a company’s financial
position, results of operations, and cash flows in conformity with GAAP (Generally Accepted
Accounting Principles). At the conclusion of the audit exercise, the auditor issues an audit report. The
quality of the audit report is a basic requirement to enhance financial statement credibility. Therefore,
audit quality is a fundamental ingredient in improving the credibility of financial statements to the
users of accounting information for informed decision making purpose.
An audit is an independent examination of the accounting records and the expression of an opinion on
the financial statements of an enterprise. It involves the auditor gathering evidences to support the
figures as presented in the financial statements of an enterprise. The essence of this task is to enable
the auditor ascertain that the figures represent a true and fair view of the state of affairs for the period
under review of the financial position of the organization as at the end of the reporting date and

1 Benson Idahosa University, Nigeria, E-mail: [email protected].

2 E-mail: [email protected].

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whether they can be relied upon for investment decision purpose. In order for the auditor to be in a
position to give a honest and an unbiased professional opinion on the financial statements to the
owners of the business, he needs to be independent from the client company.
In view of corporate scandal involving Enron and Arthur Anderson, auditor’s tenure and independence
took the centre stage of discussions. Auditors’ independence is questioned due to these corporate
scandals. It is believed that it is due to the “special relationship/closeness” that exist between the
clients and the auditors which has led to the auditor decreasing objectivity and independence to the
client (Ardhani, Subroto & Hariadi, 2019). The discussion is on the two side of the divide, whether
organizations should change their auditors on a regular basis or allow their auditor to stay for a long
time in order to build a long-term client relationship (Beattie, Brandt & Fearnley, 1999). Those who
are in favour of long-term client relationship between the auditors’ and their clients opine that a long
term relationship allows auditors gain knowledge of the operations of their clients, thus making the
auditors more efficient and improves the auditors’ ability to detect irregularities (Barbadillo &
Aguilar, 2008; Skinner & Srinivasan, 2012). On the other hand, those who support the regular
replacement of auditors are of the view that long-term auditors – client relationship may result in
empathy between them which could make the auditor to be bias in his judgement (Azizkhani, Monroe
& Shailer, 2007; Healey & Kim, 2003; Ardhani, et al., 2019). As noted by Fairchild (2008), when the
auditor’s independence is lost, the auditor may disregard certain due-diligence and misconduct by
management or staff thus resulting in poor quality of audit report.
Businesses are established with the primary aim of profit making. To achieve such objectives, rules
are laid down, regulations and procedures are set out which have to be complied with. A shareholder
or potential investor would not like to retain shares or invest money in a business where it would be
difficult to get returns on investment. These problems may be caused by an organizations lack of
proper accounting, presence of fraud and other external factors. Proper audit and good corporate
governance provides a basis for accountability and an input to management information system. Based
on the problems stated above, it is very necessary for an effective auditing system to be put in place as
a strategy for efficient and effective operations and as such, the need for proper audit reporting cannot
be overemphasized. Therefore, this study seeks to examine the impact of auditors’ independence, audit
tenure, firm characteristics on audit quality in Nigeria.

1.1. Statement of Research Problem

Over the years, several studies have attempted to examine the relationship between certain explanatory
variables and audit quality but the results have been inconclusive (Dopuch, king & Schwartz, 2001;
Myers, Myers & Omer, 2003; Singh & Singh, 2019; Ardhan, 2019; Turel, Tas, Genc & Ozden, 2017;
Harber & Marx, 2020; Martani, Rahmah, Fitriany & Anggriata, 2021; Salehi, Zimon, Tarighi &
Gholamzadeh, 2022). Most of the debates are centered on audit independence and audit tenure. Some
of the questions raised are: should a company appoint a new auditor on a regular basis to ensure
independence? Or should there be a provision for the auditor to establish a long-term relationship with
the client?
Advocates of mandatory auditor rotation claim that longer audit tenure limits auditors independence
and this impairs audit quality (Feleke, 2017; Islam, 2016). On the flip side, others believe that longer
audit tenure increases auditors’ expertise and encourages superior client-specific knowledge. In a
study by Kabiru and Abdullahi (2012) on the impact of audit independence on audit quality of money
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deposit banks in Nigeria. It was found that audit independence does not have a significant impact on
audit quality. Vanstraelen (2000) in his study reports that long-term auditor’s report client relationship
is positively related with increased likelihood of auditors issuing an unqualified opinion.
In Nigeria, it was observed that most of the studies on this subject area focused on deposit money
banks (Babatolu, Aigienohuwa & Uniamikogbo, 2016; Kighir, 2013; & Enofe, Okunega, Ediae 2013)
and due to the inconsistency in the various empirical findings, we are motivated to further inquire into
the subject matter and to the best of the researchers knowledge there is paucity of studies on the effect
of auditors’ independence, tenureship, firm characteristics on audit quality among pharmaceutical
companies listed in the Nigerian Exchange Group (NGX) this is the gap the study wants to address.

1.2. Statement of Hypotheses

Ho1: Auditors’ independence does not have significant effect on audit quality of listed
pharmaceutical companies in Nigeria.
Ho2: Audit tenure does not have significant effect on audit quality of listed pharmaceutical
companies in Nigeria.
Ho3: Firm age does not have significant effect on audit quality of listed pharmaceutical
companies in Nigeria.
Ho4: Firm Size does not have significant effect on audit quality of listed pharmaceutical
companies in Nigeria.

2. Review of the Literature

Arens, Elder, Beasley, and Fielder (2011) defined audit quality as “how well an audit detects and
report material misstatements in financial statements, the detection aspects are a reflection of auditors’
competence, while reporting is a reflection of ethics or auditors integrity, particularly independence”.
Audit quality is arguable but difficult to understand (Knechel, 2013), due to the fact that an audit
process is made up of implementation of testing procedures that users of financial statement may not
be able to observe (De Angelo, 1981; Hussainey, 2009).
Audit quality according to De Angelo (1981), “is market-assessed joint probability that a given auditor
will both discover or detect a (i) breach or significant distortions of the financial statements or in the
client accounting system and (ii) report the breach or significant distortions.” According to Jackson,
Moldrich and Roebuck (2008) audit quality can be viewed from actual and perceived quality. In terms
of actual quality, it reveals the level of risk of material misstatement in the financial statements that the
auditor has the ability to reduce. While perceived quality shows the level of confidence of the various
users of the financial statements and the ability of the auditor to reduce material misstatement in the
financial statements produced by the management. De Angelo’s definition clearly defines the role of
the auditor in audit quality. Therefore, audit quality brings together the effectiveness of an auditor to
identify a breach (audit competence) and a commitment to report such a breach to the relevant
authority (auditor independence).

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Independence is a state of being free from bias and influence; when this is absent during the audit
process, it can greatly impede audit quality. When an auditor lacks this attribute he is seen not to be
objective. Auditors must be free from bias and interference when carrying out their responsibilities.
Auditor’s independence is the auditor’s unbiased mental state of mind in taking decisions before,
during and after the audit process. Izedonmi (2000) opines that “Auditor’s independence implies the
ability of an auditor to perform his audit work in accordance to his judgment, free from any undue
influence and without being biased”. Integrity and objective are pillars of independence. It is expected
that an auditor should not only be independent but should be seen as being independent in carrying out
his assignment. He should be seen to be independent from the planning stage of the audit work,during
the execution of the work and at the reporting stage. At no point should the opinion of the auditor be
influenced. In other words, the auditor should be free from any form of external or internal
interference in carrying out his work and should report his opinion without any form of bias.
There is the tendency of a reduced objective and by extension audit quality when there is a long
relationship between the auditor and his client leading to familiarity threat. The auditor may act based
on sentiment in favour of his client. Audit tenure may be classified into large and short audit periods.
Short audit period may reveal that the auditor has less knowledge about the client while a longer audit
period may exposes the auditor to in depth knowledge about his client and their operations but to the
demerit of the auditor’s independence (Islam, 2016; Feleke, 2017). According to Adeyemi and Okpala
(2011) audit firm’s tenure may likely have a negative effect on auditor’s independence as a result of a
convergence between the client’s interest and that of the auditor. In the case of Arthur Anderson and
Enron, there was an increase in economic bond between the auditor and their client due to non-audit
services (NAS) provided by them. Some auditors are likely to sacrifice independence on the altar of
retaining a high-fee paying client (DeFond, Raghunsndan, & Subramanyam, 2002). One of the major
factors that affect auditor’s independence is the length of audit tenure (Enofe, Mgbame, Okunega &
Ediae, 2013; Akpom & Dimkpan, 2013; Babatolu, Aigienohuwa & Uniamikogbo, 2016). There are
two schools of thought as regards, audit tenure, one posit that longer audit tenure leads to an
opportunity cost of audit independence that impair audit quality (Enofe et al., 2013). On the other
hand, Tepalagul and Lin (2015) state that as audit tenure increases the degree of auditor independence
and audit quality tend to rise with it due to the fact that auditors may need sufficient time to gain the
requisite expertise in the client business. The size of an audit firm may have influence on audit quality.
Large audit from have better financial capacity, more qualified staff, superior technology and up to
date advantages enables them to withstand management pressure to compromise where as smaller
audit firms with smaller client portfolios may succumb to management pressure (Lys & Watts, 1994).
According to Mansoury and Salehi (2009), the size of an audit firm has influence on audit quality.
Large audit firm have better financial capacity, more qualified staff, superior technology and up-to-
date software to meet the needs of larger companies companies. These advantages enable them to
withstand management pressure to compromise whereas smaller audit firms with smaller client
portfolios may succumb to management pressure (Lys & Watts, 1994). According to Shumway (2001)
firm age is defined as the number of years of incorporation of the company, even though some believe
that listing age, should define the age of the company. Loderer and Waelchi (2001) posit that listing
age is the defining moment in a firm’s existence. But Gitzmann (2008) and Pickering (2011) argue
that a firm is a legal personality that is born through the process of incorporation. Therefore, this study
adopts year of incorporation as the operationalization of the variable - age of the company or as the
meaning of the age of the company.

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3. Materials and Methods

This study employed ex-post facto research design. The population of the study comprised of all the
ten (10) pharmaceutical companies listed in the Nigerian Exchange Group (NGX). These include:
Afrik Pharmaceuticals Plc, Ekcorp Plc, Evans Medical Plc, Fidson Healthcare Plc, Glaxosmithline
Consumer Nigeria Plc, Neimeth International Pharmaceuticals Plc - Nigeria, German Chemicals Plc,
Pharma-Deko Plc, Union Diagnostic and Clinic Service Plc, Morison Industries Plc. The ten (10)
listed pharmaceutical companies represent the sample size for the study for a seven (7) year period
spanning from 2013 – 2019. The seven (7) years period is to ensure robustness of the empirical results
and it took into cognisance the post adoption period of International Financial Reporting Standards
(IFRS) in Nigeria. Listed companies in Nigeria were required to adopt IFRS on 1 January 2012 to
encourage uniformity in the preparation and presentation of financial statement. The source of data for
this study is basically secondary in nature. The secondary and panel data were collected from
publication of the NGX and the annual report and accounts of the companies as well as their
respective notes to the accounts. The dependent and independent variables for this study include:
Audit quality and the explanatory variables of auditors independence, audit tenureship, firm size and
firm age.
The panel data regression analysis technique was employed due to the combination of cross sectional
and time series data in the study.
The functional form of the model is presented thus:
Audit Quality = f (Auditors Independence, Tenureship)
Infusing the two (2) control variables we have:
Audit Quality = f (Auditors Independence, Tenureship, Firm size, Firm age).
In econometric form, we have:
AUDQUAit = β0 + β1AUDINDit + β2AUDTENREit + β3FSIZEit + β4FAGEit + εit
Where, AUDQUA = Audit Quality; AUDIND = Auditor Independence; AUDTENRE = Audit Tenure;
FSIZE = Firm Size; FAGE = Firm Age; i relates to an individual firm; t relates to year; β1:β2:β3:β4
means the coefficients of factors; and εit = error term
Table 1. Variable Measurement
Variable Notation Measurement Authors Apriori
Expectation
Audit AUDQUA If audited by the Big four ‘1’ and ‘0’ if Adeniyi (2013), Enofe,
Quality otherwise Okunega & Ediae,
2013.
Auditor’s AUDIND Ratio of audit fee to company’s revenue Adeniyi (2013), +
Independence Enofe,Okunega &
Ediae, 2013.
Audit AUDTENRE Length of auditor-client relationship ‘1’ Bafqi, MoeinAddin, +
Tenure if 3years and ‘0’ if otherwise AlaviRad &
Ebrahim(2013)
Firm Size FSIZE Natural log of company’s total assets Bafqi, MoeinAddin & +
AlaviRad (2013)
Firm Age FAGE Natural logarithm of the number of Majumdar, 1997, +
years since the company was listed on Dogan 2013; Halil &
the stock exchange Hasan 2012.

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Table 2. Descriptive Statistics

AUDQUA AUDIND AUDTENRE FSIZE FAGE
Mean 0.142857 0.625600 0.809524 1.43E+08 59.42857
Median 0.000000 0.429871 1.000000 2839229. 60.00000
Maximum 1.000000 1.527151 1.000000 5.43E+08 66.00000
Minimum 0.000000 0.104337 0.000000 2200244. 52.00000
Std. Dev. 0.358569 0.509306 0.402374 2.22E+08 3.994639
Skewness 2.041241 0.936971 -1.576482 1.005756 -0.208160
Kurtosis 5.166667 2.236293 3.485294 2.101127 2.099450

Jarque-Bera 18.69097 3.583047 8.904601 4.247387 0.861274

Probability 0.000087 0.166706 0.011652 0.119589 0.650095

Sum 3.000000 13.13760 17.00000 2.99E+09 1248.000

Sum Sq. Dev. 2.571429 5.187845 3.238095 9.89E+17 319.1429

Observations 70 70 70 70 70

From Table 2 it is observed that Auditors independence (AUDIND) has a mean value of 0.62. This
suggests that about 62% of the auditors are independent. It has maximum and minimum values of
1.527151 and 0.104337 respectively with a standard deviation of 0.509. This shows that the
distributions are clustering around the sample mean. In order to ascertain if the series meet the
normality criterion, the Jarque-Bera statistics of 3.583047 with a p-value of 0.166706 shows the series
fails to meet the normality criterion.
Audit tenure from the Table 2 has a mean value of 0.809524 with maximum and minimum values of
1.00000 and 0.000000 respectively. It reveals that some of the audit firm firms have spent more than
three financial years as auditor while some have spent less than three years as auditor of the same firm.
On the average, most of the audit firms have spent more than three years as auditors of the sampled
firms. The standard deviation of 0.402314 shows the clustering around the sampled mean. The mean,
minimum and maximum values of firm size are 1.43E+08, 22000244 and 5.43E+08 respectively. This
suggests that the average size of the sample firm is 1.43E+08 (1.43 billion naira). The standard
deviation of 2.22E+08 indicates dispersion from the mean. The Jarque-Bera value of 4.247387 and
probability of 0.119589 suggests that the series did not achieve the normality criterion.
Firm age has a mean value of 59.42. This indicates that the average age of the sampled firms is 59
years. The maximum and minimum values are 66 years and 52 years. This suggests that the oldest
sampled firm is 66 years and the youngest is 52 years. The standard deviation value of 3.994639
indicates a huge dispersion from the sampled mean. While the Jarque-Bera of 0.861274 with a p-value
of 0.650095 suggests that the series fails to meet the normality criterion.

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Table 3. Pearson Correlation Result

AUDQUA AUDTENRE AUDIND FSIZE FAGE
AUDQUA 1
AUDTENRE -0.4950 1
AUDIND -0.4030 -0.2042 1
FSIZE 0.0688 -0.4077 0.6332 1
FAGE 0.5834 -0.4443 0.2776 0.5350 1

It is observed from Table 3. that Audit tenure is negatively associated with audit quality having a
correlation coefficient of (-0.4950). Audit independence is negatively associated with audit quality (-
0.4030) and audit tenure (-0.2042). Firm size is positively associated with audit quality (0.0688) and
audit independence (0.6332) but negatively correlated with audit tenure with a correlated coefficient (-
0.4077). Finally, it is observed that firm age has a positive association with audit quality (0.5834),
audit independence (0.2776), firm size (0.5350) but negatively associated with audit tenure (-0.4443).
From the above, it is revealed that none of the variables are strongly correlated (r>80%) hence, it
indicates an absence of multicollinearity in this research. Therefore, the model is suitable for
regression purposes.
Table 4. Regression analysis

Variable Coefficient Std. Error t-Statistic Prob.

C -3.134323 0.564343 -5.553929 0.0000

AUDIND -0.820926 0.117047 -7.013644 0.0000
AUDTENRE -0.231381 0.087535 -2.643293 0.0177
LOG_FSIZE 0.108646 0.029317 3.705898 0.0019
FAGE 0.036691 0.009840 3.728689 0.0018

R-squared 0.886282 Mean dependent var 0.142857

Adjusted R-squared 0.857853 S.D. dependent var 0.358569
S.E. of regression 0.135189 Akaike info criterion -0.960028
Sum squared resid 0.292417 Schwarz criterion -0.711332
Log likelihood 15.08029 Hannan-Quinn criter. -0.906054
F-statistic 31.17476 Durbin-Watson stat 2.100284
Prob(F-statistic) 0.000000

Table 4 reveals the regression result, using the Ordinary Least Square (OLS) estimation techniques, it
would be observed that Adjusted R2 of 0.857853 implies that about 86% of the systematic variable in
audit quality is explained by the independent variables. The F-Statistics, which measures existence of
linear relationship between the dependent variables, shows a value of F-statistics (31.17476) with
probability (F-statistics) of 0.000000. This suggests a significant statistical relationship of the model.
The stability of the model was tested using the ratio of the standard error of regression (0.135189) to
the mean of the dependent variable (0.142857). The ratio was less than one (0.9463). This means that
the ratio is minimal and hence proves that the model is stable with high forecasting power. The
significant of the impact of the individual explanatory variables on the dependent variable was tested
using the p-value from the regression table. Audit independence (AUDIND) has a coefficient of -
0.820926, and a t-value -7.013644 with a p-value of 0.000000. This shows that audit independence has
an inverse relationship with audit quality. This impact was significant at 5% level of significance. This
means that audit independence is a significant determinant of audit quality. Audit tenure
(AUDTENRE) has a coefficient of -0.231381 and a t-value -2.643293 with a p-value of 0.0177. This
shows that audit tenure has an inverse relationship with audit quality. This effect was significant at 5%
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level of significance. This means that audit tenure is a significant determinant of audit quality. Firm
size has a coefficient of 0.108646 and a t-statistics 3.705898 with p-value of 0.0019. This shows that
firm size (FSIZE) has a direct relationship with audit quality. This impact was significant at 5% level
of significance. This means that firm size has a significant effect on audit quality. Finally, firm age
shows a coefficient of 0.036691 and a t-value 3.728689 that a p-value of 0.0018. This reveals that firm
age (FAGE) has a direct relationship with audit quality. Therefore, there is a significant impact of firm
age on audit quality.

4. Discussion of Findings
Auditors Independence and Audit Quality
It is observed from the regression result that the t-statistics of 7.013644 is greater than the rule of
thumb of 2 and having a p-value of 0.0000. Therefore, we reject the null hypothesis which states that
Auditor’s independence does not have significant effect on audit quality. The implication of these
results is that auditors’ independence goes a long way to affect audit quality. This also means that an
independent auditor is likely to enhance and influence audit quality in any organisation, due to its
oversight functions and responsibilities. As auditors independence increases so too does audit quality
increase. This finding is in tandem with the studies by Zayol and Kukeng (2017) who found a strong
relationship between auditor independence and audit quality. Babatolu, Aigienoluwa and
Uniamikogbo (2016) examined the effect of auditor’s independence on audit quality. Their findings
showed a positive relationship between auditors’ independence and audit quality. Enofe, Okunega and
Ediae (2013) posit that as auditors’ independence increase, the quality of the audit also improves. Also
in line with our research findings, Kabiru and Abdullahi (2014) examined the effect of auditors’
independence on audit quality and it was revealed that audit independence has a positive and
significant effect on the quality of audited financial statement. Other studies in tandem are (Ilaboya &
Ohiokha, 2014; Nestor, 2017; Enofe, Mgbame & Edegware, 2014).

Audit Tenure and Audit Quality

Audit tenure had a t-statistics of -2.643293 and a p-value of 0.0177. The absolute value of the t-
statistics is greater than the rule of thumb of 2. Hence, we reject the null hypothesis and accept the
alternate hypothesis which states that audit tenure has significant effect on audit quality. This result is
not in tandem with the studies of Agoes, 2012; Bafqi, Addin & Alavi, 2013; Enofe, Okunega and
Ediae, 2013; Adeyemi, Okpala & Dabor, 2012. Other studies found that long audit tenure improve
audit quality (Ilaboya & Ohiokha, 2014; Gelanch, 2011, Tepalagul & Lin, 2015; Lim & Tam, 2010,
Adeyemi & Fagnemi, 2010). The length of the relationship between the auditor and the quality of the
audit has been established empirically that it has significant impact. This relationship could either be
long or short relationship. A long relationship as earlier mentioned in the literature review could
increase the knowledge about the client’s internal operations, but the demerit is that our familiarity
threat could set in especially when the auditor starts engaging in non-audit services (NAS) thereby
hampering or compromising his independence stance. The short tenure could lead to the auditor not
knowing much about the client’s business before disengaging to another audit client.

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Firm Age and Audit Quality

Firm age had a t-statistic of 3.728689 and a p-value of 0.0018. Since the t-statistic is higher than the
rule of thumb of 2. We reject the null hypothesis and accept the alternate hypothesis which states that
firm age has a significant effect on audit quality. Firm age has to do with the number of years the firm
has existed from the date it was listed on the NGX. Auditors are more meticulous when they are
dealing with older firms as compared to younger firms because of the experience they have acquired
over the years. The age of the firm contributes to the perception and approach which the auditor would
adopt thereby leading to a more quality audit.
The operations and accounts of older firms are usually under the scrutiny of the public hence the
reason why auditors would apply caution in the audit process of older firms.

Firm Size and Audit Quality

From the regression result in Table 4 firm size had a t-statistic of 3.705898 and a p-value of 0.0019.
Since the t-statistic is greater than the rule of thumb of 2, we reject the null hypothesis which states
that firm size does not have significant effect on audit quality. Therefore, we accept the alternate
hypothesis. This finding is in tandem with the study of Babatolu, Aigienohuwa and Uniamikogbo
(2018). In their study, Auditor’s independence and audit quality of selected deposit money banks in
Nigeria. They found a positive correlation between audit quality and firm size and statistical
significant at 5% level of significance. This indicates that the bigger the firm, the higher the quality of
audit is likely to be. Bigger companies have built a reputation over the years and would do everything
within their capacity to ensure that they do not create room for the public to doubt them. This finding
is also in line with the study of Ilaboya et al 2014; Aliu, Okpanachi & Mohammed, 2018).

5. Conclusion
Auditors’ independence, audit tenureship and firm characteristics on audit quality has been a subject
of importance in Audit literature. The study began with the background to the study, followed by the
development of four objectives preceded by the formulation of four hypotheses for the research.
Hypotheses was formulated with a view to test them at the end of the study with a scope of seven (7)
years from 2013-2019. This was followed by a statement of research that stated that despite the
numerous studies on audit independence, audit tenureship and firm characteristics on audit quality in
listed pharmaceutical companies in Nigeria, most of the studies concentrated on the financial sector,
which is a service oriented sector, conglomerate sector, and non-financial sector. This study focuses
on quoted Pharmaceutical companies in the NGX taking into consideration to see whether the results
are different from other studies conducted in the financial sector, conglomerate sector and non-
financial sector.
The results reveal showed that Auditors’ Independence has significant impact on Audit Quality of
listed Pharmaceutical Companies in Nigeria, which means that an independent auditor is likely to
enhance and influence audit quality in any organization, due to its oversight functions and
responsibilities. As auditors independence increases so does audit quality increase. Audit tenure has
significant impact on audit quality, which means that the length of the relationship between the auditor
and the quality of the audit has been established empirically that it has significant impact. Firm age has
significant impact on audit quality, which means that the age of the firm contributes to the perception
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which the auditor would adopt thereby leading to more quality audit. Firm size has significant impact
on audit quality, this indicates that the bigger the firm, the higher the quality of audit.
Based on the results, we recommend that auditors should ensure that their report or judgement should
not be influenced by the manipulations and self-centered behaviours of managers. This can be
achieved by avoiding outrageous gifts and offers made by managers or influential personality in the
organization.
Due to the familiarity threat that may arise as a result of long audit tenure, it is advised that auditor-
client engagement should not exceed three (3) years. This would mitigate the tendencies of the auditor
acting in favour of the management at the expense of audit quality. In addition, long audit engagement
could lead to over-familiarity, hence auditors should be disciplined enough to know when to
disengaged when there is evidence of familiarity threat.
Firms that are able to afford the services of the big audit firms should engage them, since it results to
improved audit quality. Younger firms should under study older firms to observe these
experiences/factors that they have acquired over the years that impacts positively on audit quality.
They could fast-track the process of acquiring those experiences or be deliberate in getting them, with
the aim of achieving audit quality.
Finally, this study is not void of limitation. The study period only covered seven (7) years and only
four explanatory variables were examined. This may not provide the opportunity for robust analysis
and interpretation. We suggest that similar study on this same research area should be carried out
using different variables and analysis. In addition, the study period could be spanned for more than
seven (7) years in order to increase the robustness of the analysis.

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